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Education loans have helped scores of students to earn a degree for themselves. They are more affordable than other types of loans like personal loans, gold loans etc. That is the reason why they are a choice of most of the students to pay for their education.<br>
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4 lesser-known facts about the education loan system in India Education loans have helped scores of students to earn a degree for themselves. They are more affordable than other types of loans like personal loans, gold loans etc. That is the reason why they are a choice of most of the students to pay for their education. This article lists 2 reasons why the education loan is the most affordable of all kinds of loans in India and 2 reasons why they hold you as accountable for repayment as any other type of loan. Here is the culmination of facts you probably didn't know about education loans. 1. The most affordable type of loan Education loan is the most affordable loan in the Indian market. Under the 80E section of RBI, which has provisions for unlimited interest adjustment against Income tax, the education loans are the lowest net costing loans in India. This is because the Government wants to incentivise parents to take loans to educate their children if need be. The interest rate of an education loan in India begins at 8% and crawls upward, but not much high though.
2. Lenient interest payment schedule The education loans offer a grace period to students. It is called the moratorium period in which the loan repayment EMI begins after 1 year of the completion of the student’s education or 6 months after the student gets a job, whichever comes earlier. No other kind of loans in India offer this degree of leniency to the borrowers. This trait is given to help students settle into their jobs first and get a breather before they start paying back the loan EMIs. The above two points illustrated why education loans are more preferable to finance higher education than other types of loans. Now let’s look at why these loans hold you as much accountable as any other type of loan. 3. The working of the interest rate The interest rates on education loans are said to be fixed. But this is not true. It is said to be fixed because the interest rate at the time when you take an education loan remains fixed throughout the term of repayment of that loan. The interest rate on education loans is a sum of Base rate + Interest spread. A question arises though. What is the interest spread? It is the variable part of the education loan interest rate that changes from lender to lender and
from time to time. Don’t worry about it though as it is governed by a regulatory authority. 4. Option for a secured or unsecured loan Once the moratorium period ends, the student is supposed to begin the repayment. If unfortunately, the student defaults on the loan repayment, the lender can liquidate the secured assets (in case of secured loan) to cover the debt. If the loan is unsecured then the lender can still liquidate the assets to cover up the debt. So, don’t default on the repayment of your loan even if it is an unsecured loan. So, these are the 4 facts that many don’t know about the education loan system in India. Please consult a financial advisor before applying for an education loan. This article in no way can substitute the professional advice of a financial advisor on whether or not to borrow an education loan. All the best to get an education loan and study the course of your choice. Related Article: - An overview of the documentation criteria for an education loan to study in the USA
